[This
review was published in the Fall 2014 issue of The Journal of Social, Political and Economic Studies, pp.
376-386.]

Book Review

With Liberty and Dividends for All: How
to Save Our Middle Class When Jobs Don’t Pay Enough

Peter
Barnes

Berrett-Koehler Publishers, Inc., 2014

There is a weather pattern that is common for summer
days in Denver, Colorado.The morning
will start with a clear cobalt-blue sky, most often with only the smallest of
clouds appearing over the mountains to the west.Clouds begin to build up as the morning
progresses, so that by mid-afternoon there are thundershowers, some of quite
ominous appearance, spotted over portions of the plain.This reviewer remembers the pattern well: as
an eleven year old in the spring of 1946, he loaded his bike with Denver Posts and headed out to throw
them door to door.It rained every
afternoon at exactly that time.It was a
day and age when the newspapers didn’t provide plastic sheaths for their
carriers to place over each paper, so we can well imagine that homeowners had
to dry out their papers in their ovens.

The expression “a cloud on the
horizon” is often used when referring to a portent of much larger developments
to come.In With Liberty and Dividendsfor
All, Peter Barnes is dealing with a subject that is of the highest
importance for American society and for which the first clouds appeared long
ago.We see this when he cites Thomas
Paine as someone who more than two centuries ago made essentially the same
points he is making now.Since their
early beginnings, the clouds have been building up, accumulating backers who
have grasped the same concepts.A
forecaster now might well say there is “a high chance of rain,” with conditions
ripe for the ideas to reach fruition.

There have been socialists who have
long endorsed the same ideas, but now the increasing polarization of wealth and
income, the decline of the American “middle class” after almost a half century
of stagnating wages, and the alliance of politics and business to form what
many see as “crony capitalism” are conditions that are bringing a growing
number of non-socialists – supporters of limited government and a market
economy – to believe that the ideas will be vital to the successful operation
of capitalism itself.

What are those ideas?

The concepts are simple.The first is a recognition that there are
many beneficences enjoyed by people that have not come about through anybody’s
effort, having been created by nature or society as a whole.Much of what surrounds us in daily life is of
this sort.As the nineteenth-century
economist Henry George emphasized, the improvements made to land are the
products of someone’s effort, but the land itself is already there.This reviewer has made the point in his own
writing on the subject that when Mike Tyson earned $30 million for his infamous
ear-biting prizefight with Evander Holyfield he was in effect plugging into an
immense social mechanism that he had not created, but on top of which he had
added his own skill and brawn.“Earnings
at that level were the product of a set of worldwide marketing institutions made
possible by advanced communications.Did
Tyson create that?Certainly not.Did anyone in particular?No.It
was the product of the accretion of vast scientific-technical-entrepreneurial-even
governmental effort by countless people.”[1]

By now, a good many people on both the
Right and Left in the United States have come to see the importance and
validity of this perception.Barnes
cites economists Robert Theobald, James Tobin, Paul Samuelson and John Kenneth
Galbraith – and reports an exchange between Fox News commentators Bill O’Reilly
and Lou Dobbs – both “on the Right,” so to speak – agreeing that “we the people
own the gas and oil discovered in America… Land and water are the domain of we
the people.” (1)

The inference from the presence of so
much “unearned increment” is that it rightfully belongs to the population at
large.Without violating anyone’s
legitimate property right, some of it can be taken to provide for the common
benefit.(We say “some of it” because
much of it must be considered to serve as “the commons” within which
individuals exercise their freedom; to take all of it would be to deny them the
space within which to carry out their lives.An example would be the air we breathe, which is, in effect, “common
property.”If each of us were charged
its full value, whatever that might be, for breathing, all individual activity
would be enormously encumbered, and that is not the intent of those who take
the concept seriously.)

The conditions that are so vitiating
“capitalism” today impel the conclusion that a market economy would be well
served if some significant portion of common property were made the basis for a
stream of non-labor income in equal portions to everyone.To the conditions we’ve already listed (i.e.,
the polarization, etc.), we should add the onrush of non-labor-intensive
technology, which is capable of producing heretofore unthought-of abundance while
at the same time stripping hundreds of millions of people of the traditional
means of self-support through remunerated employment.Barnes points out that “jobs alone won’t
sustain a large middle class in the future,” a fact that is apparent when we
consider that there will be many millions of people competing for income in the
non-technical parts of the economy.There
is a major conundrum if the potential for incredible productivity is combined
with people’s inability to buy it.Without consumer purchasing power the productivity will have no means to
continue or the population to live. One
need not have exceptional prescience to see that such a situation has explosive
potential, and that in itself gives those who are highly successful in today’s
global market a very personal stake in putting the market economy back on the
right track.

With
Liberty and Dividendsfor All is
a lucid, easily readable, highly intelligent discussion of all this.Clarity of exposition is Barnes’
hallmark.If we were to seek to classify
him ideologically, it wouldn’t be far off to place him on the American Left,
although with the caveat that the Left and some parts of the Right have been
coming to have a fair amount in common on several issues.He has been a correspondent for Newsweek and the New Republic, the co-founder of a worker-owned solar energy company;
and, as an environmentalist, has served on the board of Greenpeace
International.His compatibility with
the Right comes when he says “I want to fix capitalism rather than scuttle it…,
I strongly believe in markets… [and I]
just as strongly believe in private property, tempered by a certain amount of
community property.”(2)

The quick explanation we have just
made of Barnes’ central thesis leaves a number of particularsto be discussed.Here are some of them:

He cites figures that are by now well
known on the matter of polarization. Speaking of the United States, he reminds us
that “the top 1 percent… currently owns 35 percent of all wealth, while the
next 19 percent claims 53 percent.”The
spread has been developing for several decades: “Since 1970, the incomes of men
in their twenties and early thirties have fallen by 30 percent,” a fact that
has been masked, he says, by three factors: women’s income to produce
two-income households; overtime and second jobs; and the expansion of consumer
debt.We might add that the fall in
income has also been masked, and significantly offset, by the cheap cost of
vast quantities of imported consumer goods.

When he examines the reasons for the
decline in income, he points to four relatively recent developments:
deindustrialization (the hollowing-out of American manufacturing by
off-shoring, out-sourcing and importation); globalization (which through vastly
improved communication and low-cost transportation is the setting for the
factors just mentioned); automation; and deunionization.These
are central, of course, but don’t fully tell the story.Barnes doesn’t take into account the flood of
tens of millions of immigrants competing with Americans for work and most often
willing to take less in pay; and he places little stress on the imports, through
which workers elsewhere in effect compete with Americans, again at much lower
wages.While he lists automation among
his four causes, the brevity of his book doesn’t allow him to give it the
attention it needs for readers fully to grasp the impact, already existing and
bound to increase immeasurably in the near future, of robotics and other
non-labor-intensive technology.(3)It was
this last factor, even more than the growing polarization since 1970, that a
few years ago caught the eye of this reviewer and caused him to see that
profound changes were occurring that made necessary a rethinking of just how
capitalism will need to work.

When Barnes includes deunionization
among the reasons for the fall in wages, he is accepting the theory that unions
were a cause of higher-than-otherwise wage levels in the United States.This thesis, while common on the left, is not
shared generally by free-market economists, who argue that wage levels are the
product of the supply and demand for labor.They agree with the obvious fact that unions have been able to increase
wages for their members, but they make the point that this comes at the expense
of others who are not then able to compete for those jobs.This is not the same thing as to say that
unions have served no useful purpose; there are a number of facets involved
with “the conditions of employment” that are not clearly a result of
supply-and-demand, but rather depend on how things are organized within a given
firm or industry.(4)

It isn’t surprising that because
“common property” is so ubiquitous, Barnes reasons there is no final answer as
to what specific sources a society, through its law-making organs, might choose
for the money with which to pay the common dividend.He is, of course, able to name several.One of these, he says, might be a financial
transactions tax, a small levy upon each transaction (advocated by a number of
economists as a way somewhat to tame the ocean of financial flows in global
finance), Another might be for the
United States to adopt a Value Added Tax (VAT), also endorsed by many
economists, that would match what most other nations have.Or the government could issue new money
itself rather than have the banking system do it through the present system of
“fractional reserve banking,” and some of the newly created money each year
could fund, or help fund, the dividend.Barnes mentions that the United States government issued money directly
itself in the form of “Greenbacks” during the Civil War, and that several
economists in the 1930s urged such a monetary system.Along these lines, we would bring the
reader’s attention to the work of the American Monetary Institute (mentioned by
Barnes) in support of monetary reconstruction; and to the article by this
reviewer discussing the AMI’s proposal, the “Chicago Plan” put forward by
University of Chicago economists and others during the 1930s, and his own
recommendations, which differed somewhat from AMI’s. (See Endnote 5 here.)

Barnes includes a passage discussing
this reviewer’s “shared market economy” proposal, which calls for creating a
national trust that will hold index mutual fund shares (thereby investing
across the entire stock market), receive dividends from the shares, and pay a
common dividend to the American public from that money, which will have been
generated by the economy.When Barnes
says briefly that “the capital to acquire the holdings would come from the US
Treasury, which would borrow it from the Federal Reserve,” that is a too
succinct and not altogether accurate description of the sources this reviewer
discusses in Chapter 18 of his book A
‘Shared Market Economy’ and in his article on monetary reconstruction.(5)

One of the sources this reviewer cites comes from the
fact that a common dividend, depending upon its sufficiency, can replace the
multitude of social welfare programs, amounting to expenditures of hundreds of
billions of dollars, that exist today.Barnes
tells us that in Europe the initiatives that are proposed for a “guaranteed
minimum income” do not contemplate such a substitution: “Such income would be
in addition to, not in lieu of, existing social programs.”But he says “a trend among major developing
countries… [is to have] direct cash payment programs as alternatives to
traditional aid.”For his own part,
Barnes says “the new pipes wouldn’t replace our existing ones – like social
insurance.”

This is consistent with his as-yet rather limited
aspiration: “The long-term goal is to pay dividends that modestly supplement
labor income for everyone.”This should
be seen as insufficient, though, for the impending future in which
non-labor-intensive technology so greatly displaces “labor income.”The limited aspiration comes perhaps from
being too centered, as most people still are because that is all they’ve ever
known historically, on jobs as the means of livelihood.A “modest supplement” may be valuable as a
politically feasible first step because it fits into everyone’s current mindset,
but the future will demand more.

It seems apparent, too, that whether the common
dividend can replace the existing programs will depend on how ample the
dividend is.One of the things that can
make it ample is for the money that is now spent on social security, Medicaid,
food stamps and countless other supportive efforts to go, instead, into the
fund from which the dividend is paid.It
is interesting that Henry George argued that his proposed land tax should cause
the abolition “of all other taxes now levied.”(6)(This, of course, was speaking of taxes, not
social programs; but the idea is similar.)

This has a direct bearing on an issue
that will be of especial interest to “libertarians” on both the Left and Right:
how to minimize the role of government itself in the matter of income
distribution.Those who wish to keep an
active government role, including a vast stage for politics and ideology, will
not want the common dividend to take the place of the multitudinous
programs.For his part, Barnes sees it
as a good thing for money to go directly into the national trust fund and then
on to the population through dividends: “This means the revenue bypasses
government coffers and all the battles that surround them.” As a classical liberal, this reviewer agrees
with Barnes, and sees the bypassing of government as a major advantage to be
gained from creating an independent trust fund to pay a common dividend.(7)It would be a mistake to think of it as a
“socialist” program rather than as a far-reaching enhancement of limited
government.

Another issue has a bearing on
this.This reviewer has proposed a
national trust that will hold index mutual fund shares, paying the dividend
from the earnings.Is this better than
alternative formats?The Alaska system,
Barnes tells us, has the money from the oil pipeline revenue go into a trust
that invests the money and pays the Alaska dividend from the investment
earnings.This is almost the same thing
as this reviewer’s proposal, but without the requirement that the investments
be in index mutual funds.If we consider how the trust, even though
independent, will almost certainly be subject to pressures from interested
parties and even ideological or political factions with regard to where it
invests its money, we come to understand that the index mutual fund idea has
the advantage, to those with a libertarian bent, of removing the trust’s role
in selecting investments.By definition,
index funds are those that invest broadly across the market.

Barnes includes a very brief
discussion of the lifestyle effects of a common dividend.He observes that “we’ll have more time to
devote to family, friends, communities, and other interests.An ever-larger number of us will be able not
only to pursue happiness but to enjoy it.”No doubt that is true.There is,
however, a dystopian possibility that society will have to take seriously about
a (relatively) “jobless” future.Will
tens of millions of people use their leisure well, as we might hope they will?Or will Jonathan Swift’s horrific vision of
the brutish Yahoos seen by Gulliver on his voyage to the land of the houyhnhnms
rather set the tone?Our expectation
will, of course, be colored by whether we are optimists or pessimists; but the
truth is we don’t know what that future will bring.We can anticipate, however, that civilization
will face unprecedented psychological, spiritual and cultural issues.

As we noted earlier, Barnes is a
committed environmentalist.This has
caused him to have “global warming” and a perceived need for the reduction in
carbon dioxide emissions play a central role in his thoughts about how the
common dividend system should work.He
devotes a chapter to cap-and-trade, with a very considerable reduction over
time of the extent of permits issued.He
tells how President Obama has called for “a descending cap on carbon that will
cut U.S. emissions 80 percent by 2050.”Barnes
favors combining an auctioning of permits with a distribution of the revenue
from the auction to the public (as part of the common dividend), resulting in
what he calls a “cap and dividend” system.The dividend would greatly increase the political palatability of the
permit program and would offset the increased fuel costs the public would incur
because of the limitation of fuel supplies.

For those who are convinced by the
“global warming” thesis and as to its scientific foundation, his inclusion of
limits on carbon will be most welcome.It should be apparent, though, that this is an add-on that is by no
means integral to the book’s main theme.A recognition of “unearned increment” and of how this justifies a common
dividend to maintain a middle class and undergird a market economy does not
depend upon such an added feature.A
marriage of the two will be unfortunate if it complicates the picture by
introducing highly controverted issues of science and ideology. And if the skeptics toward “globaI warming”
turn out to be right, the marriage will be doubly unfortunate.

Readers
who have had the intellectual fortitude to grapple with all we have considered
in this review – and we have confidence that most readers of this Journal are
of that sort – will easily appreciate that Peter Barnes has produced a
remarkably valuable book.It deserves
earnest attention.

Dwight D.
Murphey

ENDNOTES

(1) Dwight
D. Murphey, The
Great Economic Debacle – and Beyond (Council for Social and Economic
Studies, 2011), p. 147.This book is available
without charge on the Internet at www.dwightmurphey-collectedwritings.info.The second and third paragraphs of that
website tell how to access the book’s contents on the site.

(2) We
should note, of course, that similar support for a market economy and private
property has been voiced by the social democratic parties in Europe ever since
German socialists adopted the Bad Godesberg Program
in 1959.This suggests that there is
considerable room for disagreement about just what it is that “a market economy”
and “private property” entail.An
extreme example of how the terms can be misused comes to mind.The American advocate of employee-ownership
Louis Kelso wrote of a plan for what he called “capitalism” that called for a
total equalization of incomes, which necessarily is altogether incompatible
with a market economy.This was, in
effect, a ruse, effective with the many who didn’t read him carefully.We don’t assign too much significance to
Barnes’ speaking well of Kelso, since Barnes is by no means calling for a
George Bernard Shaw-type of socialist levelling of all incomes.For a discussion of Kelso’s ruse, see this
reviewer’s article “Selling Socialism as ‘The New Capitalism’ in the June 1990
issue of Conservative Review.The article is available as Article 25 (i.e.,
A25) on Murphey’s website identified in Endnote 1
here.

(3) For
an extensive description of the new technologies and their effects on work, see
this reviewer’s books The Emerging Crisis
of Economic Displacement and A ‘Shared
Market Economy’, each available without charge on his website.They are books B8 and B12, respectively, on
the site.

(4)
These issues of workers’ wages and conditions of employment are discussed at
length in Chapter 12 on “Theories of Exploitation” in this reviewer’s book Socialist Thought.The book appears as Book 4 (i.e., B4) on his
website.

(5)The article is “Capitalism’s Deepening
Crisis: The Imperative of Monetary Reconstruction,” published in the Fall 2011
issue of this Journal, pp. 277-300.It
appears as Article 105 on Murphey’s website.

(7)
It would seem to this reviewer that Barnes has misconstrued Henry George’s
intent when he says (on page 51) that “unlike [Thomas] Paine, who would have
returned recaptured rent to everyone, George would have left it in government’s
hands.” In Protection or Free Trade
(p. 285), George wrote of “a fund in which the tenant himself [which in the
context of George’s discussion we can take to mean everyone] would be an equal
sharer with the richest.”As to this
fund, he mentioned (p. 284) “a large and constantly increasing fund [that]
would be provided for common uses….”Were those uses to be determined by government?Not necessarily.“All schemes for securing equality in the
conditions of men by placing the distribution of wealth in the hands of
government,” George wrote at p. 305, “…presuppose pure government; but it is
not government that makes society.”It
was in keeping with this that George quoted with favor (p. 312) a suggestion
that there be “a pension to everybody.”George wrote a great deal, though; and Barnes basically relies on a
different book of his than this reviewer does, so it seems best to leave the question
open, simply citing the foregoing quotes as some evidence of George’s views.

[1]Dwight D.
Murphey, The Great Economic Debacle – and
Beyond (Council for Social and Economic Studies, 2011), p. 147.This book is available without charge on the Internet
at www.dwightmurphey-collectedwritings.info.The second
and third paragraphs of that website tell how to access the book’s content on
the site.